Stock Market Pausing? Eyes on Q4 Earnings...

Public Companies' Operating Profit Expected to Increase by 60%
Strong Fundamentals Even in a Correction Market
Significant Earnings Improvement in Top Market Cap Stocks like Samjeon, LG Chem, and SK Hynix

[Asia Economy Reporter Oh Ju-yeon] As the KOSPI surpassed the 2750 mark to reach an all-time high, a short-term cooling-off period due to overheating is expected, drawing market investors' attention back to fundamentals (corporate earnings). Although a correction due to profit-taking may occur following the sharp rise in the index since last month, it is analyzed that the underlying strength will remain intact as the operating profits of domestic listed companies in the fourth quarter are expected to increase by more than 60% year-on-year.

According to financial information provider FnGuide on the 10th, the operating profit forecast for 261 domestic listed companies estimated by three or more securities firms for this year's fourth quarter is 35.8399 trillion KRW, which is expected to increase by 61.01% compared to 22.2591 trillion KRW in the fourth quarter of last year. Including 25 companies turning profitable and 4 companies reducing losses, a total of 187 companies are expected to improve their operating profits in the fourth quarter, accounting for 71.65% of the total. This means that 7 out of 10 companies have better fundamentals than last year.

Recently, the earnings of the top market capitalization stocks leading the stock market rise due to foreign capital inflows are also significantly improving.

Samsung Electronics' operating profit for the fourth quarter is expected to be 10.1311 trillion KRW, a 41.5% increase from 7.1603 trillion KRW last year. Recently, Samsung Electronics' stock price, which started at 56,400 KRW on the 2nd of last month amid expectations that the semiconductor industry could enter a long-term boom phase, rose 31.03% to close at 73,900 KRW on the 9th of this month, reaching an all-time high within a month. In particular, from the second half of next year, it is expected to enter a full-scale earnings improvement cycle centered on semiconductors and displays (DP), suggesting that the stock price may continue its upward trend. DB Financial Investment set Samsung Electronics' target price at 95,000 KRW on the same day.

On the day of Quadruple Witching Day (when the expiration of four stock market derivatives?index futures, index options, individual stock options, and individual stock futures?coincide), amid increased market volatility, Samsung Electronics' stock price was trading at 73,000 KRW as of 10 a.m., down about 1% from the previous trading day, but it is evaluated to have an additional 30% upside potential from the current level.

DB Financial Investment researcher Oh Kyu-jin said, "Short-term earnings concerns due to the resurgence of COVID-19 and the decline in the won-dollar exchange rate still exist, but Samsung Electronics' DRAM and NAND inventory is currently tight, below the historical average," adding, "Next year, memory demand recovery centered on servers will accelerate, and a rebound in memory prices is expected, marking the beginning stage of a memory market recovery."

SK Hynix is also expected to see its fourth-quarter operating profit increase by 268.7% year-on-year to 870.2 billion KRW. KB Securities and Kiwoom Securities set the target price for SK Hynix, which was trading at 117,500 KRW on the day, at 150,000 KRW.

Among the top market capitalization stocks, LG Chem shows the most remarkable increase in operating profit for this fourth quarter. LG Chem's operating profit for the fourth quarter is expected to be 810.9 billion KRW, a 4190.2% increase compared to the same period last year. Additionally, the Tesla effect and accelerated battery technology innovation are raising expectations for the expansion of the electric vehicle market next year.

LG Chem is also the stock most purchased by foreigners this month, with net buying of 295 billion KRW from the 1st to the 9th. The stock price has risen rapidly, trading at 819,000 KRW on the day compared to the closing price of 623,000 KRW on the 2nd of last month, up 31.46% in a month. Target prices are also being revised upward. NH Investment & Securities and Yuanta Securities set LG Chem's target prices at 1.1 million KRW and 1 million KRW, respectively, indicating an upside potential of 18-26% from the current price level.

The trend of increasing operating profits for domestic listed companies is expected to continue not only in the fourth quarter but also next year. KB Securities researcher Lee Eun-taek said, "There have been three instances in 20 years where both semiconductor and other industries' profits increased simultaneously, all recording profit growth of 32-68%," adding, "Next year's KOSPI operating profit growth rate is likely to exceed the forecasted 38%, possibly increasing by more than 50%."

This content was produced with the assistance of AI translation services.